Mumbai: Aviation turbine fuel (ATF), or jet fuel prices, have fallen by over 6% since January and by about 4% since April 1, which could lead to airlines posting narrower losses for the fourth quarter of FY14.
ATF, which comprises about 50% of airline expenditure, was priced at R74,105.16 per kiloliter in Mumbai on April 1 compared to R78, 783.84 a kiloliter on January 1. The fall in the ATF prices has been complemented by the strengthening of rupee against the dollar in the last couple of months. The rupee, which closed at R60.08 on Friday, has gained as much as 2.59% against the dollar since January 1.
However, industry experts say though the fall in jet fuel prices has led to lower operational costs for airlines, especially for the fourth quarter of FY 14, it is unlikely that this itself would help airlines come out of the red.
“Had there been no pressure in pricing, some airlines could have broken even or even made some profits,” said Deep Narayan Mukherjee, senior director at India Ratings & Research.
“There is a huge overcapacity in the system since the supply of seats far exceeds the current demand. For this demand and supply to be at somewhat the same level, the economy needs to grow around 8-9% annually, which is clearly not the case,” Mukherjee added.
04/04/14 Rhik Kundu/Financial Express
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ATF, which comprises about 50% of airline expenditure, was priced at R74,105.16 per kiloliter in Mumbai on April 1 compared to R78, 783.84 a kiloliter on January 1. The fall in the ATF prices has been complemented by the strengthening of rupee against the dollar in the last couple of months. The rupee, which closed at R60.08 on Friday, has gained as much as 2.59% against the dollar since January 1.
However, industry experts say though the fall in jet fuel prices has led to lower operational costs for airlines, especially for the fourth quarter of FY 14, it is unlikely that this itself would help airlines come out of the red.
“Had there been no pressure in pricing, some airlines could have broken even or even made some profits,” said Deep Narayan Mukherjee, senior director at India Ratings & Research.
“There is a huge overcapacity in the system since the supply of seats far exceeds the current demand. For this demand and supply to be at somewhat the same level, the economy needs to grow around 8-9% annually, which is clearly not the case,” Mukherjee added.
04/04/14 Rhik Kundu/Financial Express
